And now, it’s Fortune’s turn to tell us that India isn’t an economic juggernaut — and isn’t likely to become one, in the near future.
Clay Chandler laments India’s
almost willful disregard for the fundamentals of developmental economics. China’s economic miracle was achieved by getting the basics right—building good roads, educating women and young girls, loosening labor restrictions, and opening the economy to competition and foreign trade.
India, by contrast, is the global economy’s idiot savant. It excels at the impossible, turning out hundreds of thousands of brilliant engineers a year. Its software houses manage complex data across thousands of miles of undersea cable for the world’s most sophisticated clients. India has world-class business leaders and, unlike China, solvent banks. And yet India flubs the obvious stuff. The national roadway network is a shambles and the power grid even worse. Nearly a third of India’s population—and more than half its women—can’t read or write. India has moved grudgingly to lower tariffs and balked at turning money-losing state-owned enterprises over to the private sector. Red tape and corruption discourage foreign investment, as do restrictions on how firms deploy workers.
Of all India’s failures, lousy infrastructure may be the most puzzling. The nation’s highway network stretches just 124,000 miles, compared with 870,000 miles in China. Most of the roads are simple two-lane affairs, maintained badly if at all.
Morgan Stanley estimates that India is spending only about $2.5 billion a year building roads, while China is spending $25 billion a year. For goods sent by rail, freight costs are twice the average of other developed countries’ and three times those in China. At India’s ports, shipments often languish for days waiting for customs clearance and loading berths; goods typically take six to 12 weeks to reach the U.S., compared with two to three weeks for goods from China. Electric power in India costs twice as much as in China: Public utilities sock it to industrial producers to make up for the power they give away to farmers and the urban poor. The national grid is so bad that as much as 40% of the electricity generated is simply lost in transmission.
The result is that firms in India pay far more than rivals in China to produce, distribute, and export their products. ..
In my opinion, India’s disregard for the basics goes beyond the government. Even private sector charities & religious endowments are more likely to donate to some spiffing state-of-the-art medical facility rather than a primary healthcare initiative.
Q) What’s behind India’s disregard of the basics? And how do we channel private charities in the right direction?